FOR WEDNESDAY, 28 MARCH 2012
MARKET VIEW: Positive. Generally positive. American markets look to have healthy momentum; European markets look less strong; China (Shanghai) is done: time to short China? See below.
NEW TRADES:PHM, Pulte Group Housing. I, personally, feel the American Housing Sector is still a disaster, and that deflation of the Great American Housing Bubble will run another decade. However, that doesn't keep me from trading housing.
MACRO VIEW: How healthy are the indices?
Well, the reader must first adjust to the indicators we are presenting here. We are now calling our Chart Meter indicator our Super Indicator. It appears twice in the charts, in the top pane as the vital red line and in the bottom pane as the black line. We look at the Super Indicator twice, relative to the indicators charted beside them.
(1) The ideal bull picture has the red line (Chart Meter) leading the black line in the first pane higher, in effect pulling the black line (M5) up with it.
(2) The unideal bull picture has the red line (Chart Meter) collapsing through the black line (M5) in the top pane. This is ALMOST ALWAYS a sell signal.
(3) The ideal sign of a continuing bull move is to have the Chart Meter in the bottom pane (black line) and the T11 Sunmarry (brown line) hugging the top of the chart. As I write this I notice that the chart of the DJIAverage I have just posted does not show this, but has compressed the brown line into the middle of the chart. This is a fluke, created by the SA compression. I hope the other charts will show this more accurately. The PHM (Pulte Housing Group) chart above shows this accurately.
(4) Possible entry and exit points are shown in the second pane down, with upticks indicating heavy buying and downticks indicating heavy selling. A congested area with upticks and downticks indicates a major battle between buyers and sellers.
(5) Trends are shown in the third pane down. I work with three trends: short, intemediate and long-term.
(6) The Super Indicator (Chart Meter) 'tends' to move up from -1 to +25 and down from -1 to -25. Selloffs that hold support at the -1 level occur quite often and are not serious threats to a rally. An issue with selling that pushes the Chart Meter below -1 and bends (breaks) one of the trendlines down should be considered seriously as a potential reversal.
When we look at each of these index charts we should try to keep these different measures in mind.
The DJIA is positive and shows no indicators at the moment of an approaching weakness. Things do change quickly however. Momentum can decay very fast or very slowly. Note the European indexes below for issues that are showing signs of decay. Note the Chinese (Singapore) index for an issue that decayed and is now appearing to be a broken uptrend.
The Banking Index chart shows an explosive move up in the Chart Meter indicator (red line leading brown line) in the first pane below in October 2011 -- but then there is a pullback and the red line collapsed back through the black line. But the trend held up; and the Chart Meter held support at -1 (not shown on the chart, sorry). The -1 support did break in March 2012, for a moment; however the trends held up; and this was soon followed by another uptick in buying strength. At the moment positive still, with the Chart Meter pulling back and resting.
FCHI, CAC French Index: The picture here shows a real rally which began in November 2011; and, now, a tired index. After the main thrust of the rally, the Chart Meter pulled back modeslty to rest, which is positive. Now however, the M5 (black line, top pane) seeming to be losing its vigor. It is supposed to follow the Chart Meter to new highs -- and this still might happen. At the moment, however, I'm cautious here. Trend are positive, which is good. The Chart Meter reading is negative 5, not a deal-breaker in itself clearly, but a warning.
Click to enlarge
The Nikkei Index shows what a real rally looks like. First a small advance in October 2011, followed by a collapse of the red line back through the black line in early November 2011. Then a furious advance in late November 2011, which move is still intact. In late December 2011 there is a furious battle between buyers and sellers (pane 2 down) but the outcome has already been decided by the Chart Meter's advance. Current picture still positive. The Chart Meter reading in +17.
SSEC, the Shanghai Index, shows a much different picture, one specific to China perhaps (a picture not shared in such a dramatic fashion by the HSI, Hang Seng Index, which is showing weakiness, but does not appear to be collapsing). Nothing much to like in the SSEC chart unless you are a bear and looking to short something. Note how the red line lead the black line up as the late December 2011 rally began. Now the red line has crashed through the black line; sellers have spiked; and the short-term trend has broken down. Not a pretty picture.
XOI, Oil Stocks:Oil stocks are weakening and look to be breaking down. Both M5 and the Chart Meter (black and red first pane lines) are decaying. Short-trend has broken down.
Click to enlarge
XAU, Gold and Silver shares: Very volatile. One could trade the red line/black line cohesion and divergence quite successfully. When you are trading using the buyer uptick (second pane) you really want to see a massive uptick in the red line (first pane) accompanying the uptick. The most recent uptick (mid-February 2012) was not followed by such a move up in the Chart Meter and soon gave a reversal sign. And issue with both the Chart Meter and the T11D Sunmeter hugging the bottom of the chart (bottom pane) is in a pronounced Bear move.
More information on the CGTS systems can be found at:
MICHAEL J CLARK
Clark's Gate Timing System
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.